Interest. Interest September 2. September 2. Amount. Amount

Transcription

1 In the opinion of utan & ucker, P, Bond ounsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under ection 103 of the Internal evenue ode of 1986 and is exempt from tate of alifornia personal income taxes. In the further opinion of Bond ounsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond ounsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond ounsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. ee X herein. IU-FU B- I: &P BBB+ ee I herein. $34,855,000 I F IVI II BII IPV B II ated: ate of elivery ue: eptember 2, as shown below he $34,855,000 aggregate principal amount of ity of Irvine imited bligation Improvement Bonds eassessment istrict o (the Bonds ) are being issued pursuant to provisions of the efunding ct of 1984 for 1915 Improvement ct Bonds (ivision 11.5 of the alifornia treets and Highways ode) and a Fiscal gent greement, dated as of July 1, 2011, by and between the ity of Irvine (the ity ) and he Bank of ew ork ellon rust ompany,.., as fiscal agent (the Fiscal gent ). he Bonds are payable from unpaid eassessments levied on the parcels within the ity s eassessment istrict o Interest on the Bonds will be payable on arch 2 and eptember 2 of each year, commencing arch 2, ll Bonds will bear interest from their date of delivery, as indicated above. Initially, the Bonds will be delivered in fully registered form only and when delivered will be registered in the name of ede & o., as nominee for he epository rust ompany, ew ork, ew ork ( ), which will act as securities depository for the Bonds. xcept as described herein, ownership interests in the Bonds may be purchased in denominations of $5,000 or any integral multiple thereof, in book-entry form only as described herein. Upon receipt of payments of principal of, premium, if any, and interest on the Bonds, will in turn remit such principal, premium, if any, and interest to the participants in (as described herein) for subsequent disbursement to the beneficial owners of the Bonds. ee H B Book-ntry ystem herein. he Bonds are subject to optional and mandatory redemption prior to maturity as described herein. Proceeds from the sale of the Bonds, together with certain other amounts available under the Fiscal gent greement, will be used to (a) pay upon maturity or refund the ity of Irvine ssessment istrict o imited bligation Improvement Bonds, roup wo, (b) fund a reserve fund for the Bonds, and (c) pay costs associated with the sale and delivery of the Bonds. he obligations of the ity under the Bonds are not general obligations of the ity, but are limited obligations, payable solely from the eassessments and the other assets pledged therefor under the Fiscal gent greement. either the faith and credit nor the taxing power of the ity, or the tate of alifornia, or any political subdivision thereof, is pledged to the payment of the Bonds. he Bonds are imited bligation Improvement Bonds and are payable solely from and secured solely by the eassessments and the other assets pledged under the Fiscal gent greement. otwithstanding any other provision of the Fiscal gent greement, the ity is not obligated to advance available funds from the ity treasury to cure any deficiency in the edemption Fund. UI HU Base UIP o aturity ate Principal eptember 2 mount 2012 $1,705, ,875, ,930, ,985, ,045, ,105, ,175, ,255,000 Interest ate 3.000% ield 1.050% UIP 8 U5 V3 1 X9 7 Z4 H8 aturity ate Principal eptember 2 mount 2020 $2,345, ,445, ,550, ,665, ,790, ,920, ,065,000 Interest ate 4.250% ield 4.300% UIP HB6 H4 H2 H0 HF7 H5 HH3 Investment in the Bonds involves risks which may not be appropriate for some investors. ee I F for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. HI V P I I IFI F QUI F. I I U F HI IU. IV U H I FFII I BI IFI I H I F IF IV II. he Bonds are offered when, as and if issued and delivered to the Underwriter. he Bonds are subject to the approval as to certain legal matters by utan & ucker, P, osta esa, alifornia, Bond ounsel, and the satisfaction of certain other conditions. ertain legal matters will be passed upon for the ity by utan & ucker, P, osta esa, alifornia, ity ttorney, and by rrick, Herrington & utcliffe P, os ngeles, alifornia as isclosure ounsel. ertain legal matters will be passed on for the Underwriter by tradling occa arlson & auth, a Professional orporation, ewport Beach, alifornia. It is anticipated that the Bonds in book-entry form through the facilities of on or about ugust 2, ated: July 20, 2011

2 o dealer, broker, salesperson or other person has been authorized by the ity or the Underwriter to give any information or to make any representations with respect to the ity or the Bonds other than the information contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the ity or the Underwriter. his fficial tatement does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. his fficial tatement is not to be construed as a contract between the ity and the purchasers of the Bonds. tatements contained in this fficial tatement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not be construed as a representation of facts. ertain of the information set forth herein has been obtained from sources which the ity believes to be reliable, but such information is not guaranteed as to accuracy or completeness. he information and expressions of opinion herein are subject to change without notice; and neither the delivery of this fficial tatement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the ity since the date hereof. he information set forth in this fficial tatement is not guaranteed as to accuracy or completeness by the Underwriter, and this fficial tatement is not to be construed as a representation by the Underwriter. he Underwriter has provided the following sentence for inclusion in this fficial tatement. he Underwriter has reviewed the information in this fficial tatement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. I I I HI FFII F HII F BU F F-I. U B IV H H FUU U IU HI I B HIV, U U IFF I F H F IB HI. I HI P, H I, PJ, IIP, XP, I, BIV II XPI I IIF F-I. PJI, F, UPI, XPI F PII, I H F-I XP QUIFI I HI I B H UI FH I HI FFII. UIP data included here is subject to opyright 2011, merican Bankers ssociation. UIP data included herein is provided by the tandard & Poor s UIP ervice Bureau, a division of he craw-hill ompanies, Inc. and is provided for convenience of reference only. either the ity nor the Underwriter shall be responsible for the selection or correctness of the UIP numbers set forth herein. he ity maintains a website. However, the information presented on that website is not part of this fficial tatement and should not be relied upon in making investment decisions with respect to the Bonds. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. uch stabilizing, if commenced, may be discontinued at any time. he Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page hereof and such public offering prices may be changed from time to time by the Underwriter.

3 I F IVI I UI ukhee ang, ayor Beth rom, ayor-pro em arry gran, ouncilmember teven hoi, ouncilmember Jeffrey alloway, ouncilmember I FF ean Joyce, ity anager haron anders, ssistant ity anager ichele. und, ity reasurer harie podaca,, ity lerk ary Burton, irector of dministrative ervices onna ullally, anager of Fiscal ervices PI VI Bond ounsel utan & ucker, P osta esa, alifornia isclosure ounsel rrick, Herrington & utcliffe P os ngeles, alifornia eassessment ngineer illdan Financial ervices naheim, alifornia Financial dvisor to the ity Fieldman, olapp & ssociates Irvine, alifornia Fiscal gent he Bank of ew ork ellon rust ompany,.. os ngeles, alifornia Underwriter s ounsel tradling occa arlson & auth, a Professional orporation ewport Beach, alifornia

4 [HI P II F B]

5 B F Page IUI...1 P F FII...2 Purpose of the Bonds...2 H B...3 uthority for Issuance...3 eneral...3 edemption of the Bonds...3 ransfers and xchanges...4 Book-ntry ystem...5 B B VI QUI...5 UI F H B...5 eneral...5 eassessment Installments...6 eserve Fund...7 ovenant to ommence uperior ourt Foreclosure Proceedings...8 Priority of ien...9 xisting iens...10 eeter Plan...10 U U F FU...11 IUI IU...11 H II...12 istrict Formation...12 istrict ocation...12 Property ax and ssessment Payment elinquency tatus...15 irect and verlapping ebt...16 ssessed Value-to-Bond atio...18 I F...21 eneral...21 isks of eal state ecured Investments enerally...21 Foreclosure hortfall...22 onavailability of ity Funds...22 Bankruptcy and Foreclosure elays...22 i

6 B F (continued) Page eeter Plan ermination...23 FI/Federal overnment Interests in Properties...23 arthquakes...24 ndangered pecies...24 Hazardous ubstances...25 Property Values...25 Parity of axes, Bonds and pecial ssessments...26 Proposition Ballot Initiatives and egislative easures...27 o cceleration...27 I udit of ax-xempt Bond Issues...27 oss of ax xemption...27 X...27 III...28 I FII I...30 UII...30 FII VI...30 II IFI...31 PPIX - F F B U PII...-1 PPIX B - U F I PVII F H FI...B-1 PPIX - F F IUI IU...-1 PPIX - B PPIX - II BU P PPIX F -... F-1 ii

7 FFII $34,855,000 I F IVI II BII IPV B II IUI his fficial tatement (which includes the cover page, the table of contents and the ppendices attached hereto) is furnished by the ity of Irvine (the ity ) to provide information concerning the ity of Irvine imited bligation Improvement Bonds eassessment istrict o. 11-1, issued in the aggregate principal amount of $34,855,000 (the Bonds ). he Bonds are being issued pursuant to provisions of the efunding ct of 1984 for 1915 Improvement ct Bonds (ivision 11.5 of the alifornia treets and Highways ode) and a Fiscal gent greement, dated as of July 1, 2011 (the Fiscal gent greement ), by and between the ity and he Bank of ew ork ellon rust ompany,.., as fiscal agent (the Fiscal gent ). ee H B. apitalized terms not defined elsewhere in this fficial tatement have the meanings assigned to such terms in the Fiscal gent greement. Proceeds from the sale of the Bonds, together with certain other amounts available under the Fiscal gent greement, will be used to (a) pay upon maturity or refund the outstanding $36,500,000 aggregate principal amount of ity of Irvine ssessment istrict o imited bligation Improvement Bonds, roup wo, issued on ugust 7, 2002 (the Prior Bonds ) as described herein, (b) fund a debt service reserve fund for the Bonds, and (c) pay costs associated with the sale and delivery of the Bonds. ee P F FII and U U F FU. eassessment istrict o (the eassessment istrict ) consists of approximately net acres located in the Quail Hill, hady anyon and urtle idge developments located in the southeastern part of the ity, each of which is substantially developed. ccording to the ounty s property ownership records, there were 1,643 parcels in the eassessment istrict, all but 8 of which are developed, which parcels comprise custom lots held by individual owners. hese parcels had a total assessed value over $1.6 billion for Fiscal ear he average assessed value within the eassessment istrict for is approximately $1,000,600. otal reassessments equal $34,855,000. his provides an overall value-to-lien ratio of approximately 47 to 1 (not including other outstanding public indebtedness applicable to taxable property in the eassessment istrict). s such, more than 95% of the parcels located in the eassessment istrict have a value-to-lien ratio of not less than 30 to 1. he $34,855,000 principal amount of Bonds constitutes direct debt for the taxable property in the eassessment istrict. s set forth in able 3 under H II - irect and verlapping ebt below, there is approximately $53 million of other outstanding public indebtedness applicable to taxable property in the eassessment istrict. hus, the estimated direct and overlapping debt allocable to the taxable property in the eassessment istrict is approximately $88 million. he eassessment istrict is comprised of a portion of three master planned communities, as further described herein. t the time of issuance of the Prior Bonds, 1,647 units were expected to be completed on an equal number of parcels. hereafter, eight parcels were merged to form four parcels (such that these four parcels have a double lien of assessments), and owners of all but nine parcels have completed construction of their homes, one of which is expected to have two units. Presently, the eassessment istrict is expected to consist of 1,643 residential units. ssessments have been levied on all of the assessable parcels within the eassessment istrict. Upon issuance of the Prior Bonds, the Prior Bonds were secured by the unpaid assessments levied on parcels within the area constituting the eassessment istrict, together with interest thereon. Upon the issuance of the Bonds, certain

8 eassessments levied on the parcels within the eassessment istrict will secure the Bonds. he unpaid eassessments will represent fixed liens against all of the assessable property within the eassessment istrict. Installments of principal and interest sufficient to meet debt service on the Bonds (the eassessment Installments ) will be included on the regular ounty of range (the ounty ) tax bills sent to owners of the lots within the eassessment istrict against which there are unpaid eassessments. he Bonds are secured by and payable solely from the eassessments and other assets pledged under the Fiscal gent greement. ll obligations of the ity under the Bonds are not general obligations of the ity, but are limited obligations, payable solely from the eassessments and the other assets pledged therefor under the Fiscal gent greement. either the faith and credit nor the taxing power of the ity or the tate of alifornia (the tate ), or any political subdivision thereof, is pledged to the payment of the Bonds. here are certain risks associated with the purchase of the Bonds. ee I F. he summaries and references to documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report or instrument. Purpose of the Bonds P F FII n July 12, 2011, the ity ouncil of the ity (the ity ouncil ) confirmed a total eassessment lien in the amount of $34,970,000 on the eassessment istrict on the basis of the preliminary principal amount for the Bonds. Proceeds from the sale of the Bonds, together with certain other amounts available under the Fiscal gent greement, will be used to (a) pay upon maturity or refund the Prior Bonds, (b) fund a reserve fund for the Bonds, and (c) pay costs associated with the sale and delivery of the Bonds. he Prior Bonds were issued on ugust 7, 2002 pursuant to that Indenture, dated as of ctober 1, 2001, by and between the ity of Irvine (the ity ) and B estern rust ompany (predecessor to he Bank of ew ork ellon rust ompany,..), as trustee (the Prior rustee ), as amended and supplemented by a First upplemental Indenture, dated as of July 1, 2002 (the First upplemental Indenture ), by and between the ity and the Prior rustee (as so amended and supplemented, the Prior Bonds Indenture ). he Prior Bonds were issued in accordance with the unicipal Improvement ct of 1913 (ivision 12 of the alifornia treets and Highways ode), the Improvement Bond ct of 1915 (ivision 10 of the alifornia treets and Highways ode), hapter 5 of ivision 7 of itle 2 of the ity of Irvine unicipal ode, rticle XIII of the onstitution of the tate of alifornia, and the Proposition 218 mnibus Implementation ct (tatutes of 1997, hapter 38). Proceeds of the sale of the Bonds in an amount sufficient to pay upon maturity or refund the Prior Bonds will be deposited in an irrevocable escrow fund (the scrow Fund ) established by the ity with he Bank of ew ork ellon rust ompany,.. (the scrow Bank ), pursuant to an scrow greement, dated as of July 1, 2011, by and between the scrow Bank and the ity. mounts so deposited in the scrow Fund will be held in cash in an aggregate amount sufficient, without reinvestment, to pay upon maturity or refund the Prior Bonds on eptember 2, 2011 (the edemption ate ) at a redemption price equal to the principal of, premium, and interest on the Prior Bonds on the edemption ate. he securities and other monies held under the scrow greement are pledged to the payment of the Prior Bonds to be paid upon the maturity or redemption thereof and neither the principal of nor the interest thereon will be available for the payment of the Bonds. 2

9 H B uthority for Issuance he Bonds are being issued pursuant to the provisions of the Improvement Bond ct of 1915, as amended, being ivision 10 of the alifornia treets and Highways ode, and the efunding ct of 1984 for 1915 Improvement ct Bonds, as amended, being ivision 11.5 of the alifornia treets and Highways ode (the ct ). eneral he Bonds will be issued in fully registered form only, and when delivered, will be registered in the name of ede & o., as nominee of he epository rust ompany ( ), ew ork, ew ork. will act as securities depository for the Bonds. wnership interests in the Bonds may be purchased in book-entry form only, in denominations of $5,000 or any integral multiple thereof within a single maturity. o long as is acting as securities depository for the Bonds, payments of principal of and interest on the Bonds will be made to. ee H B Book-ntry ystem herein and PPIX B-. he Bonds will be dated the date of delivery and will bear interest at the rates per annum and will mature, subject to the redemption provisions set forth below, on the dates and in the principal amounts, all as set forth on the cover page hereof. Interest on the Bonds is payable semiannually on arch 2 and eptember 2 of each year, commencing arch 2, 2012 (each an Interest Payment ate ) to the persons in whose names ownership of the Bonds is registered on the egistration Books at the close of business on the immediately preceding ecord ate, except as provided in the Fiscal gent greement. uch interest will be paid by check mailed by the Fiscal gent on such Interest Payment ate, by first class mail, postage prepaid, to such registered wners at their respective addresses shown on the egistration Books as of the close of business on the immediately preceding ecord ate. Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Principal of, and premium, if any, on the Bonds will be payable upon presentation and surrender thereof upon maturity or earlier redemption at the principal corporate trust office (the rust ffice ) of the Fiscal gent in os ngeles, alifornia. Principal of and premium, if any, and interest on the Bonds will be paid in lawful money of the United tates of merica. edemption of the Bonds ptional edemption he Bonds are subject to optional redemption in whole, or in part, on any Interest Payment ate, at the following respective edemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption: edemption ates edemption Price arch 2, 2012 through arch 2, % eptember 2, 2019 and arch 2, eptember 2, 2020 and arch 2, eptember 2, 2021 and thereafter 100 3

10 andatory edemption from eassessment Prepayments he Bonds are subject to mandatory redemption, in whole or in part on any Interest Payment ate, from and to the extent of any prepayment of eassessments, at the following respective edemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption: edemption ates edemption Price arch 2, 2012 through arch 2, % eptember 2, 2019 and arch 2, eptember 2, 2020 and arch 2, eptember 2, 2021 and thereafter 100 election of Bonds for edemption henever provision is made in the Fiscal gent greement for the redemption of less than all of the Bonds of a particular maturity, the Fiscal gent will select the Bonds to be redeemed from all Bonds not previously called for redemption, by lot in any manner which the Fiscal gent in its sole discretion may deem appropriate and fair. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Bonds which may be separately redeemed. otice of edemption he Fiscal gent on behalf of the ity will mail (by first class mail) notice of any redemption to the respective wners of any Bonds designated for redemption at their respective addresses appearing on the egistration Books, to the ecurities epositories and to the unicipal ecurities ulemaking Board, at least 30 but not more than 60 days prior to the edemption ate. otice of redemption to the unicipal ecurities ulemaking Board will be given electronically and uploaded to its lectronic unicipal arket ccess () system. either the failure to receive any notice so mailed, nor any defect in such notice, will affect the sufficiency of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the edemption ate. If, on said edemption ate, moneys for the redemption of all the Bonds to be redeemed, together with interest to said date, will be held by the Fiscal gent so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. ransfers and xchanges o long as they are subject to the book-entry system, the Bonds may be transferred or exchanged only as described under Book-ntry ystem. However, should the Bonds cease to be in book-entry form, then they may be transferred or exchanged as provided in the Fiscal gent greement. ee PPIX B U F I PVII F H FI. 4

11 Book-ntry ystem in ew ork, ew ork, will act as securities depository for the Bonds. he Bonds will be issued as fully-registered securities registered in the name of ede & o. ( s partnership nominee) or such other name as may be requested by an authorized representative of. ne fully-registered bond certificate will be issued for each maturity of the Bonds in the aggregate principal amount of such maturity, and will be deposited with. ee PPIX B-. eneral B B VI QUI he debt service requirements with respect to the Bonds is set forth on the following schedule: ear nding eptember 2 Principal Interest otal 2012 $ 1,705,000 $ 1,516, $ 3,221, ,875,000 1,348, ,223, ,930,000 1,292, ,222, ,985,000 1,234, ,219, ,045,000 1,174, ,219, ,105,000 1,113, ,218, ,175,000 1,045, ,220, ,255, , ,221, ,345, , ,221, ,445, , ,221, ,550, , ,219, ,665, , ,219, ,790, , ,218, ,920, , ,215, ,065, , ,218, otals $34,855,000 $13,445, $48,300, UI F H B ubject only to the provisions of the Fiscal gent greement permitting the application thereof for the purposes and on the terms and conditions set forth in the Fiscal gent greement, all of the eassessments (including prepayments thereof), together with interest and any penalties thereon, and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Fiscal gent greement are pledged by the ity to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Fiscal gent greement and the ct. aid pledge will constitute a first lien on such assets. Pursuant to the ct, the Bonds are issued on the basis of findings by the ity that (1) each estimated eassessment Installment, is less than the corresponding annual installment of principal and interest on the portion of the original assessment being superseded and supplanted, by the same percentage for all subdivisions of land within the eassessment istrict, provided that any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation; (2) the number of years to maturity of the Bonds is not more 5

12 than the number of years to the last maturity of the Prior Bonds, and (3) the principal amount of the eassessment on each subdivision of land within the eassessment istrict is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same percentage for each subdivision of land within the eassessment istrict, provided that any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation. Under the ct, any reassessment so approved and confirmed shall not be deemed to be an assessment within the meaning of, and may be ordered without compliance with the procedural requirements of, rticle XIII of the alifornia onstitution. ee I F - Proposition 218. he ity will comply with all requirements of the ct and the Fiscal gent greement to assure the timely collection of the eassessments, and interest thereon, including, without limitation, the enforcement of delinquent eassessments. ny funds received by the ity in and for the eassessment istrict, including, but not limited to, collections of eassessments (including prepayments thereof), and interest thereon, upon the secured tax rolls, collections of delinquent eassessments and interest and penalties thereon, through foreclosure proceedings or otherwise, and collections of amounts for the ontinuing osts of the Bonds, will as soon as practicable be transmitted directly to the Fiscal gent, without deduction, to be deposited into the funds and accounts under the Fiscal gent greement. Pursuant to the Fiscal gent greement, the Fiscal gent will establish, maintain and hold in trust the edemption Fund and the following accounts therein: the Prepayment ccount and the ontinuing osts ccount. In addition, the Fiscal gent will establish, maintain and hold in trust the eserve Fund. he Bonds are secured by the amounts held in such funds and accounts. Principal of and interest on the Bonds are payable exclusively out of the edemption Fund. Payments of the principal of, premium, if any, and interest on the Bonds are payable solely from the eassessments and the other assets pledged therefor under the Fiscal gent greement, together with interest and any penalties received with respect thereto, and any other amounts (including proceeds of the sale of the Bonds) held in any account established pursuant to the Fiscal gent greement for the Bonds. Pursuant to the Fiscal gent greement, the Fiscal gent will establish, maintain and hold in trust a special fund designated the edemption Fund. xcept as otherwise provided in the Fiscal gent greement, the Fiscal gent will deposit in the edemption Fund all eassessments (other than prepayments thereof), together with interest and any penalties thereon, and any other amounts required to be deposited therein by the Fiscal gent greement or the ct. otwithstanding any other provision of the Fiscal gent greement, the ity is not obligated to advance available funds from the ity treasury to cure any deficiency in the edemption Fund. ll obligations of the ity under the Bonds are not general obligations of the ity, but are limited obligations, payable solely from the eassessments and the other assets pledged therefor under the Fiscal gent greement. either the faith and credit nor the taxing power of the ity or the tate, or any political subdivision thereof, is pledged to the payment of the Bonds. eassessment Installments he eassessments and interest thereon, will be payable and be collected in the same manner at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. he eassessments, together with the interest thereon, will be payable in each year preceding the date of maturity of the Bonds in an amount sufficient to pay the principal of the Bonds, and interest thereon, when due, together with other amounts available therefor. In addition, the ity will, in accordance with and subject to the limitations contained in ection 8682 and ection of the ct, cause to be included in the annual assessment roll, an amount estimated to be sufficient to pay the ontinuing osts of the Bonds for the following annual period. 6

13 n or before each Interest Payment ate, the Fiscal gent will withdraw from the edemption Fund for payment to the wners of the Bonds the principal, if any, of and interest then due and payable on the Bonds. Five Business ays prior to each Interest Payment ate, the Fiscal gent will determine if the amounts then on deposit in the edemption Fund are sufficient to pay the principal, if any, of and interest due on the Bonds on such Interest Payment ate. In the event that amounts in the edemption Fund are insufficient for such purpose, the Fiscal gent, on or before such Interest Payment ate, will withdraw from the eserve Fund to the extent of any funds therein the amount of such insufficiency, and will transfer any amounts so withdrawn to the edemption Fund. mounts so withdrawn from the eserve Fund and deposited in the edemption Fund will be applied to the payment of the Bonds. he ity will not be obligated to advance available funds of the ity to cure any deficiency which may occur in the edemption Fund; provided, however, that said determination will not prevent the ity, in its sole discretion, from so advancing funds. s provided in the Fiscal gent greement, the reasurer will, before the final date on which the ounty uditor will accept the transmission of the eassessments for inclusion on the next tax roll, prepare or cause to be prepared, and will transmit to the ounty uditor, such data as the ounty uditor requires to include the installments of such eassessments, together with interest thereon, and the ontinuing osts of the Bonds on the next secured tax roll of the ounty. ll sums received from the collection of the eassessments and of the interest and penalties thereon will be placed in the edemption Fund. ll amounts collected for the ontinuing osts of the Bonds will be placed in the ontinuing osts ccount within the edemption Fund. ny prepayments of eassessments will be placed in the Prepayment ccount within the edemption Fund; provided, however, that amounts attributable to the administrative costs of the prepayment of eassessments will be placed in the ontinuing osts ccount. Upon receipt of any eassessments, or interest or penalties thereon, or prepayments of eassessments or amounts collected for the ontinuing osts of the Bonds, the ity will, as soon as practicable, transfer the same to the Fiscal gent, together with a ritten ertificate of the ity that identifies which portion, if any, of the amounts so transferred that constitute eassessments, or interest or penalties thereon, or prepayments of eassessments or amounts collected for the ontinuing osts of the Bonds. ny eassessment may be prepaid at any time by paying, in whole or part, the unpaid amount thereof less, if available, the amount, if any, transferred to the edemption Fund from the eserve Fund pursuant to the Fiscal gent greement, together with the redemption premium, if any, set forth in the Fiscal gent greement and interest on such prepaid eassessment (if not collected in a eassessment installment) to the earliest redemption date for which notice of redemption may be given in accordance with the Fiscal gent greement. he eassessment istrict is included in the ounty s eeter Plan, which is an alternative method for the distribution of secured property taxes to local agencies. If the ounty s eeter Plan is terminated (or if the ounty fails to make payments to the ity when due under the eeter Plan), the failure of any owners to pay eassessment Installments in a timely manner could result in the unavailability of money to pay the principal of or interest on the Bonds. ee - eeter Plan below. eserve Fund Under the Fiscal gent greement, the Fiscal gent is required on the date of issuance of the Bonds to deposit in the eserve Fund from proceeds of sale of the Bonds an amount not less than 75% of maximum annual debt service on the Bonds (the defined eserve equirement under the Fiscal gent greement). mounts deposited in the eserve Fund will be used and withdrawn by the Fiscal gent solely for the purpose of making transfers to the edemption Fund in the event of any deficiency at any time in the edemption Fund of the amount then required for payment of the principal of and interest on the Bonds or for the purpose of redeeming Bonds from the edemption Fund. 7

14 he ity will cause the eserve Fund to be administered in accordance with the ct; provided that proceeds from redemption or sale of properties, with respect to which payment of delinquent eassessments and interest thereon was made from the eserve Fund, will be credited to the eserve Fund. H I H BII PIH H V FU XP H X H IQU PI P F FU IZ. henever, after the issuance of the Bonds, a eassessment is prepaid, in whole or in part, as provided in the ct, the Fiscal gent, pursuant to a ritten equest of the ity, will transfer from the eserve Fund (but only to the extent of moneys on deposit therein and from no other source whatsoever) to the Prepayment ccount within the edemption Fund an amount, specified in such ritten equest, equal to the product of the ratio of the original amount of the eassessment, or portion thereof, so prepaid to the original amount of all unpaid eassessments, times the initial eserve equirement; provided that in no event will moneys be so transferred in an amount that causes the eserve Fund to drop below the eserve equirement. o long as no vent of efault has occurred and be continuing, any amount in the eserve Fund in excess of the eserve equirement on arch 3 and eptember 3 of each year will be withdrawn from the eserve Fund by the Fiscal gent and will be deposited in the edemption Fund. n each eptember 3, the Fiscal gent will transfer from assessment payments and amounts collected from foreclosures to the eserve Fund an amount which, together with amounts then on deposit therein, is sufficient to cause the aggregate amount in the eserve Fund to equal the eserve equirement. he moneys in the eserve Fund may be invested in any Permitted Investment. ee PPIX B U F I PVII F H FI Investment of oneys. ovenant to ommence uperior ourt Foreclosure Proceedings he ity is under no obligation to transfer any funds of the ity to the edemption Fund for payment of the principal of or interest on the Bonds if a delinquency occurs in the payment of any eassessment Installment. However, the ct provides that in the event any eassessment Installment is not paid when due, the ity may order the institution of a court action to foreclose the lien of the unpaid eassessment. In such an action, the real property subject to the unpaid eassessment Installment may be sold at judicial foreclosure sale. o long as the eassessment istrict is included in the ounty s eeter Plan and the ity is paid under the eeter Plan for all eassessments levied therein, the proceeds of any foreclosure sale of a taxable parcel of property in the eassessment istrict will be paid to the ounty s eeter Plan and not to the ity. If the ounty s eeter Plan is terminated (or if the ounty fails to make payments to the ity when due under the eeter Plan) and the eserve Fund is depleted, there could be a default or a delay in payments to the wners of the Bonds pending prosecution of foreclosure proceedings against taxable parcels of property in the eassessment istrict with delinquent eassessments and receipt by the ity of foreclosure sale proceeds, if any. uch foreclosure sale proceedings are not mandatory. However, the ity has covenanted in the Fiscal gent greement that it will within 150 days of a delinquency in the payment of eassessments, or interest thereon, or amounts to pay the ontinuing osts of the Bonds, forthwith undertake and diligently prosecute foreclosure proceedings in the manner prescribed in the ct to collect such delinquent amounts; provided, however, if the amount collected is greater than 92.5% of the installment of the eassessment and interest thereon, and amounts to pay the ontinuing osts of the Bonds, to be collected, the ity shall not be required to undertake such foreclosure proceedings, unless it is determined that any single property owner is delinquent in excess of $7,000 in the payment of such amounts in which case it shall diligently 8

15 institute, prosecute and pursue such foreclosure proceedings against such property owner as set forth in the Fiscal gent greement; provided, that the ity shall not be obligated to undertaken any such proceedings if the ity is in receipt of amounts sufficient for such purpose under the ounty eeter Plan or similar arrangement. If there is a failure to pay any installment of principal of or interest on the Bonds then, and in each and every such case during the continuance of such vent of efault, the Fiscal gent may, or at the direction of the wners of not less than a majority in aggregate principal amount of the Bonds at the time utstanding shall, if the ity has not otherwise done so, commence foreclosure against any parcels of real property in the eassessment istrict with delinquent eassessments, or delinquent payments of interest thereon, or delinquent payments of amounts for the ontinuing osts of the Bonds, as provided in the ct. Upon the redemption or sale of the real property responsible for such delinquencies, the ity shall deposit in the eserve Fund, from the net proceeds of such redemption or sale, the amount of any delinquency advanced therefrom in accordance with the Fiscal gent greement. It is possible that no bid for the purchase price of applicable property would be received at the foreclosure sale. ee I F. otwithstanding any other provision of the Fiscal gent greement, the ity is not obligated to advance available funds from the ity treasury to cure any deficiency in the edemption Fund established under the Fiscal gent greement. Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, this statutory right of redemption was amended to provide that before notice of sale of the foreclosed parcel can be given following court judgment of foreclosure, a redemption period of 120 days must elapse. Furthermore, if the purchaser at the sale is the judgment creditor (here, the ity) an action may be commenced by the delinquent property owner within six months after the date of sale to set aside such sale. he constitutionality of the aforementioned legislation which repeals the one year redemption period has not been tested and there can be no assurance that, if tested, such legislation will be upheld. mendments to the ct enacted in 1988 provide that under certain circumstances property may be sold upon foreclosure at a lesser inimum Price or without a inimum Price. inimum Price as used in the ct is the amount equal to the delinquent installments of principal or interest of the assessment or reassessment, together with all interest penalties, costs fees, charges and other amounts more fully defined in the ct. he court may authorize a sale at less than the inimum Price if it will not result in an ultimate loss to the Bondowners or, under certain circumstances, if owners of 75% or more of the outstanding bonds consent to such sale. In the event court foreclosure proceedings are commenced by the ity, there may be delays in payments to wners of the Bonds pending prosecution of the foreclosure proceedings to completion, including the receipt by the ity of the proceeds of the foreclosure sale. It is also possible that no qualified bid will be received at the foreclosure sale. ee I F herein. Priority of ien he eassessments and each eassessment Installment, and any interest and penalties thereon, constitute a lien against the respective parcels of assessable property within the eassessment istrict until the same are paid. uch lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens which may thereafter be created against the property. uch lien is co-equal to and independent of the lien for general taxes and any lien imposed under the ello-oos ommunity Facilities ct of 1982, as amended. ee H II - irect and verlapping ebt herein for a description of other special taxes or assessments secured by a lien on property within the eassessment istrict. 9

16 xisting iens ontained within the eassessment istrict are numerous overlapping local agencies providing public services and having liens against the respective parcels of assessable property within the eassessment istrict. ee H II - irect and verlapping ebt herein. mong other liens, the taxable parcels of property in the eassessment istrict are subject to an annual maintenance assessment levied by the ity for street lighting, landscape and park maintenance. ach taxable parcel of property in the eassessment istrict will be subject (for Fiscal ear ) to a maximum annual vacant property assessment of $25.13 per until such parcel is reflected on the ounty ssessor s roll as improved property. s improved property, each taxable parcel of property in the eassessment istrict will be subject (for Fiscal ear ) to a maximum annual residential property assessment of $ per dwelling unit. uch assessments are subject to an increase each year based upon the onsumer Price Index, ll Urban onsumers, for the range ounty rea, as determined by the United tates epartment of abor, Bureau of abor tatistics, but such increase shall not be more than 3.5% in any given year. he lien for the eassessments is co-equal to the lien for the annual maintenance assessment and the lien for general property taxes. In addition, the taxable parcels of property in the eassessment istrict are subject to the levy of special taxes therein and authorized the incurrence of bonded indebtedness with respect to the Board of ducation of the Irvine Unified chool istrict F o. 01-1, he boundaries of F o overlap the eassessment istrict. n June 12, 2003, F o issued $92,500,000 principal amount of djustable ate pecial ax Bonds, eries f this amount, approximately 38% or $38 million is allocable to taxable property in the eassessment istrict. he taxable parcels of property in the eassessment istrict are also subject to the levy of an ad valorem tax to pay debt service on bonds issued for improvement districts of the Irvine anch ater istrict. eeter Plan In 1949, the alifornia egislature enacted an alternative method for the distribution of secured property taxes to local agencies. his method, known as the eeter Plan, is now set forth in ections of the alifornia evenue and axation ode. Upon adoption and implementation of this method by a county board of supervisors, local agencies for which the county acts as bank and certain other public agencies and taxing areas located in the county receive annually the full amount of their share of property taxes on the secured roll, including delinquent property taxes which have yet to be collected. hile a county benefits from the penalties associated with these delinquent taxes when they are paid, the eeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk. o implement a eeter Plan, the board of supervisors of a county generally must elect to do so by July 15 of the fiscal year in which it is to apply. he Board of upervisors of the ounty adopted the eeter Plan on June 29, 1993 and has elected to include in its eeter Plan assessments levied in certain assessment districts, including the eassessment istrict, on the secured roll. nce adopted, a county s eeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless prior to the commencement of a fiscal year a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. n electing county may, however, opt to discontinue the eeter Plan with respect to any levying agency in the county if the board of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll by that agency. ee I F eeter Plan 10

17 ermination. he ounty has never discontinued the eeter Plan with respect to any levying agency. he ity was not required by law to participate in the eeter Plan with respect to the eassessment istrict and could withdraw at any time with the consent of the ounty. Upon making a eeter Plan election, a county must initially provide a participating local agency with 95% of the estimated amount of the then accumulated tax delinquencies (excluding penalties) for that agency. In the case of the initial year distribution of taxes and assessments (if a county has elected to include assessments), 100% of the tax and assessment delinquencies (excluding penalties) are to be apportioned to the participating local agency which levied the tax or assessment. fter the initial distribution, each participating local agency receives annually 100% of the secured property tax levies to which it is otherwise entitled, regardless of whether the county has actually collected the levies. If any tax or assessment which was distributed to a eeter Plan participant is subsequently changed by correction, cancellation or refund, a pro rata adjustment for the amount of the change is made on the records of the treasurer and auditor of the county. uch adjustment for a decrease in the tax or assessment is treated by the ounty as an interest-free offset against future advances of tax levies under the eeter Plan. o the extent that the ounty s eeter Plan continues in existence and is carried out as adopted, the ounty s eeter Plan may help protect the wners of the Bonds from the risk of delinquencies in eassessments. U U F FU he Bond proceeds and other available amounts will be applied as follows: ources of Funds Uses of Funds Principal mount of Bonds $34,855, Plus et riginal Issue Premium 9, mounts eleased from Prior Bonds Indenture 6,029, otal ources $40,893, edemption of Prior Bonds $37,835, eserve Fund 2,417, Underwriter s iscount 400, osts of Issuance Fund 240, otal Uses $40,893, IUI IU he ity has covenanted for the benefit of holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the eassessment istrict by not later than eight months following the end of the ity s fiscal year (which currently would be arch 1) (the nnual eport ), commencing with the nnual eport for the fiscal year, and to provide notices of the occurrence of certain enumerated events. he nnual eport will be filed by ildan Financial ervices, as dissemination agent (the issemination gent ) on behalf of the ity with the unicipal ecurities ulemaking Board s lectronic unicipal arket ccess system (the ystem ), for purposes of 11

18 ule 15c2 12(b)(5) (the ule ) adopted by the U.. ecurities and xchange ommission ( ). he notices of enumerated events will be filed by the issemination gent on behalf of the ity with the unicipal ecurities ulemaking Board. he specific nature of the information to be contained in the nnual eport or the notices of enumerated events is set forth in PPIX F F IUI IU. hese covenants have been made in order to assist the Underwriter in complying with... ule 15c2-12(b)(5). he ity has not previously failed to comply in all material respects with any previous undertakings with respect to said rule to provide annual reports or notices of enumerated events. H II he Bonds are secured by and payable from the eassessments and other assets pledged under the Fiscal gent greement. istrict Formation he proceedings for the eassessment istrict were conducted pursuant to the ct and a resolution adopted by the ity ouncil on July 12, he ity ouncil confirmed a total reassessment in the eassessment istrict of $34,970,000 on July 12, 2011 on the eassessment istrict on the basis of the preliminary principal amount for the Bonds, and recorded such confirmed reassessment. illdan Financial ervices, naheim, alifornia (the eassessment ngineer ) prepared a written report, dated July 12, 2011 (the ngineer s eport ), which contains, among other things, the proposed reassessment for each of the parcels in the eassessment istrict. ith respect to the prior assessment district with respect to which the ity completed its proceedings for the levy of assessments after July 1, 1997, the ity complied with the provisions of ection 4 of rticle XIII. he total amount of the proposed reassessments was based upon the eassessment ngineer s estimated cost of redemption of the Prior Bonds and findings by the ity that (1) each estimated eassessment Installment, is less than the corresponding annual installment of principal and interest on the portion of the original assessment being superseded and supplanted, by the same percentage for all subdivisions of land within the eassessment istrict, provided that any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation; (2) the number of years to maturity of the Bonds is not more than the number of years to the last maturity of the Prior Bonds, and (3) the principal amount of the eassessment on each subdivision of land within the eassessment istrict is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same percentage for each subdivision of land within the eassessment istrict, provided that any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation. istrict ocation he eassessment istrict covers approximately net acres located in the southeastern part of the ity. he eassessment istrict is generally bounded on the southwest by the an Joaquin Hills ransportation orridor, on the north by Bonita anyon rive and the community of urtle idge, on the northeast by the an iego Freeway (I-405) and on the east by aguna anyon oad and the aguna Freeway (-133). he eassessment istrict covers portions of three contiguous developments commonly known as Quail Hill, hady anyon and urtle idge. ost development and home sales for these developments occurred between 2001 and 2005; the Prior Bonds were issued in the summer of he prior assessment district parcels comprised 253 acres and 1,647 anticipated lots for single family units (ultimately 8 lots were combined into 4). 12